Wednesday, May 22, 2013

Long Term Care vs. Retirement Income

With Americans living longer than ever
before and remaining active at ages that were unthinkable a
generation or two ago, the need to plan for old age and retirement
becomes increasingly important. And an important part of this is
planning for health needs. The US Department of Health and Human
Services estimates that 70% of people of the age of 65 or older will
need some form of longer term care during their lives. This care
could be for a few weeks, a few months or could be permanent.

The cost of this kind of care can be
greater than most people realize. For example a private room in a
nursing home can cost $205 per day or over $74,000 per year. A home
health aide will cost $25 per hour. These are major expenses and when
they arise can throw financial planning for retirement out of gear,
leading to severe financial hardships. In many cases, assets that
have been set aside for retirement need to be compromised. There are
today insurance policies that can protect you from these
contingencies and because of the money back guarantee and income tax
free death benefit that they offer, should be treated as a saving cum
insurance tool that does not require cash outflow with no chance of
monetary return.

This type of insurance policy is a
universal life insurance policy with long
term care benefits incorporated into it. Here’s how it works:

If There Are Long Term Care Costs:
In many cases the policy can provide you with up to 5 times the
dollars needed to reimburse long term care costs. The specified death
benefit amount is used to cover long term care costs up to the
monthly maximum as lain down in the policy. There is also an option
or a rider to provide for coverage beyond the depletion of the death
benefit.

If Long Term Care Costs Do Not
Arise: If you do not require long term care the full death
benefit amount remains intact. If only a part of the death benefit
amount has been used to meet long term care costs, the balance
remains available as death benefit. The entire available death
benefit amount will go to your beneficiaries free of income tax and
will not be subject to probate if anyone besides your estate is named
as the beneficiary.

The Option to Change Your Mind:
A Return of Premium Rider is available on both single premium as well
as certain flexible premium policies. If you should decide to
discontinue the policy, the premiums paid by you till that time will
be returned to you, less any loans, withdrawals or benefits paid. The
terms of the Return of Premium Rider will govern the terms of the
refund.

Here’s an
example of how this type of policy could benefit you. Suppose you
have set aside $300,000 of you retirement portfolio to cover possible
long term care costs. If you move $100,000 into a single premium
policy, you could get up to $80,000 plus per years for 6 years to
cover long term care costs. That totals to $480,000 or nearly 500% of
the premium amount. If there are no long term care expenses, your
beneficiaries could receive over $150,000 as tax free death benefit.
In case some part of the death benefit is used for long term care
costs, the remaining portion will go to your beneficiaries’ tax
free. The exact amount to benefit available will vary from case to
case. And if you should change your mind about the policy, you can
request for return of premium, less any benefits paid, loans or
withdrawals.

An insurance policy to protect you from
long term care costs can give you all the protection you need while
freeing up a significant part of your portfolio for use where greater
returns may be expected.

About Allied Brokers

Allied Brokers is a full-service insurance brokerage. Founded in 1954, we provide insurance products throughout California and several other states. We have insurance policies and services for any of your insurance needs: Auto, Homeowners, Condominiums, Apartments, Earthquake, Flood, Renters, Business, Health, Life, Motorcycle, Boat, RV and Estate Planning. Experience the "can do" attitude of our agents.